G20’s compact with Africa: How beneficial for Africa is it really?

The emphasis on Africa, a hitherto marginalised region in G20 summits, was one of the most prominent features of Germany's G20 Presidency. Germany launched the Compact with Africa (CwA) initiative under the G20’s finance track in 2017. The main objective of the CwA initiative was to encourage private investment in Africa, particularly in the infrastructure sector, for high growth and job creation within Africa. Domestic pressures to stem migration from Africa also played an important role in the formulation of the CwA initiative. It was felt that creation of adequate economic opportunities for Africa’s youth within Africa would deter young Africans from seeking a better life in Europe.

Under CwA, African countries willing to join the initiative commit to an investment compact and engage with international organisations (World Bank, IMF, and AfDB) to discuss the initiative’s objectives and national priorities. Thereafter, the compact countries focus on reform measures and implementation. The three main reform areas under the CwA are as follows:

1. Macro-economic environment for investment which covers economic policies in African countries to main macro-economic stability and ensure adequate infrastructure provision.
2. Business environment which includes the general environment in which firms operate, regulatory practices and predictability, state capacity for management of public-private partnerships, project preparation etc.
3. Financing environment for investors which includes development of local capital markets and support from long-term institutional investors in major financial systems.

So far only a handful of African countries: Benin, Burkina Faso, Cote d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo, and Tunisia have joined the initiative. According to a recent report by Rob Floyd, Kapil Kapoor and Laura Sennett, 101 commitments have already been made by nine participating African economies out of which 43%, 37%, and 21% were related to macro-economic stability, business and financial environment respectively.^[i] While 33% and 22% of the commitments under the macro-economic and business environment pillars were achieved only 5% of the commitments under financial environment has been achieved so far. Thus, one can say that there is some progress in reform process in the Compact countries but given the long-term nature of the reform process it is not clear to what extent the African countries will succeed in attracting private capital from these reforms. The following paras discuss some of the main issues with regard to the CwA and what the initiative holds for the African continent.

One of the first questions that emerges with respect to this initiative is how invested are other G20 members in this initiative or is it just a German initiative? So far not many G20 countries have involved themselves deeply in the CwA initiative. Only Germany, France, United Kingdom, Japan, Canada, Spain, Netherlands, and the United States have participated in this initiative.^[ii]In fact Katherine Keil argues that the CwA is more like a G7 initiative because apart from Spain and Netherlands, all other countries are a part of the G7.^[iii] Many of the G20 members have their own programmes with Africa and may not be very keen to get closely involved in the CwA process. In fact, Chinese funding for African infrastructure exceeds the contributions of other countries and international organisations and comes without any additional conditionalities or reform requirements.

Secondly, although the initiative claims to be demand-driven, one of the major problems with the initiative is that it continues to look at Africa as a problem and adopts the age-old prescriptive approach to address development challenges in the continent. Currently, South Africa is the only African country which is a G20 member. Although the African Union and New Partnership for Africa's Development (NEPAD) attend G20 summits, the continent as a whole has little say in global development issues discussed at the G20. Under such circumstances, an initiative like CwA which essentially tries to facilitate reforms in African countries to boost private investment for higher growth and more jobs for Africans perpetuates the historical relationship that the continent always had with the West.

Thirdly, the initiative assumes that promoting private investment and development of physical infrastructure through domestic reforms is the panacea for all of Africa’s development challenges. There is little evidence to support this view though. In order to address poverty, inequality and youth unemployment in Africa, it is not only important that the continent attract private investors but also that such investments lead to the creation of decent jobs for Africans. The central question is - Will Africa profit from private industries or will the private sector profit at Africa’s expense? Africa’s development history suggests the latter is more likely without adequate safeguards. While African governments are committing to domestic reforms to attract the private sector, there is no guarantee that the private sector will meet environmental or social standards. What will be the role of G20 members and international organisations like the IMF and the World Bank? They will provide technical assistance, help in project preparation and encourage their private sector to invest in Compact countries. Unfortunately, the issues of fair wages, decent working conditions, environmental standards, sustainable development goals are completely absent from the CwA narrative. African governments will be responsible for ensuring these on their own. Moreover, overemphasis on the creation of physical infrastructure through public-private partnerships (PPPs) ignores the importance of social infrastructure like health and education which are essential for poverty alleviation and development.

Another key feature of the CwA initiative is that it reinforces the activities of the IMF and the World Bank. Directing private investment to the infrastructure sector has been the focus of these institutions for a long time. However, the fiscal, legal, regulatory, and institutional challenges with regard to PPPs have been completely neglected. PPPs often cost more in the long-run and expose governments to financial risks. In case of private financing of large infrastructure projects in immature financial markets, there are high risks that the private returns come at the expense of long-term fiscal costs. The CwA framework also includes business arbitration courts and Systemic Investor Response Mechanisms (SIRM) which often prioritise investor interests over public interest. In a nutshell, although launched with a lot of fanfare, the actual benefits for African countries from the initiative is still not clear and offers nothing new to African countries. In fact, the G20 members must realise that they would contribute more to Africa’s development by focusing the issues like fair trade practices, climate change, global financial architecture etc.

(This article originally appeared in the Observer Research Foundation's website)

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^[i] https://t20japan.org/policy-brief-g20-compact-with-africa/

^[ii] https://us.boell.org/2017/12/13/g20-compact-africa-innovative-partnerships-or-business-usual

^[iii] Ibid.

Weddings bells for frogs as climate change looms over India

It is heartening to see that citizens are finally waking up to the acute water crisis that the country is facing. The most notable achievement has been that of the Udupi Citizen’s Forum which organised a grand wedding of two frogs to please the God in charge of rains. The Udupi Citizen’s Forum did not stop at just the wedding. The newly married frog couple has also been packed off for a honeymoon. Unlike my Marxist husband (yes, there are still a handful of them left in India) who hates gala weddings, I love them. Good food, sarees, dance and selfies (in a frog wedding selfie may be a bit difficult though) are the true essence of my life. Not just God and me, but I have a feeling the Citizen’s Forum has managed to please Rabindranath Tagore as well.

The young Tagore, as the manager of the family’s zamindari, was moved by the poverty and helplessness of the villagers and resolved to provide an example of rural reconstruction in his own zamindari. In his estate, the river was faraway and water scarcity was the main concern of the villagers. Young Tagore, keen to help the villagers, proposed that the villagers get together and dig a well while he would bear the costs of cementing it. Rationality, as any micro economics textbook would have us believe, would make the suffering villagers jump at such a proposal. But the villagers reasoned that such a collective action to address the water problem would help Tagore get an easy ticket to heaven. They firmly believed that by helping the villagers access water, Tagore would go to heaven, something that they felt they needed to prevent at all costs, even at the cost of their own inconvenience. So, the well never got made and they continued living in hell.  

Many such experiences with villagers deeply disappointed Tagore and subsequently led him to question the politics of the day around home rule and self-reliance. But had Tagore been alive today, he would surely have been very happy to see that people in India are at least bothered about their own welfare now and are also uniting to solve their own problems. Finally, self-reliance is here. Now that we have collectively managed to marry off two innocent frogs, off course without their consent, let us spend the next hundred years on working out rules of frog weddings. Firstly, we need to classify frogs according to castes and gotras. Marriage between a brahmin frog and low caste frog will surely annoy our Gods and worsen the water crisis. Secondly, dowry needs to be worked out and all the wedding expenses must be borne by the bride frog’s village or city. If two frogs dare to fall in love and decide to have a good time on their own then such frogs should be killed honourably and anti-Romeo squads must be formed immediately to make sure inter-religious and inter-caste frog unions don’t happen. We must do all this at once to please the Gods who will then address our water woes.

It will take another century for us to be able to collectively decide that in addition to lavish frog weddings, we need to better manage our water resources by recycling water, increasing the water-use efficiency in irrigation, water harvesting etc. What? We don’t have another century? The worst impacts of climate change will be felt in the next few decades itself? Majority of India’s river basins are vulnerable to droughts because of shifting rainfall patterns? Climate change and water stress would displace thousands of people in India in the coming decades? India’s food security is under severe threat because the frequency of droughts will increase? Shut up. Will you please? We will not let climate scientists, hydrologists, social scientists and others of that kind desist us from the holy duty of organising lavish frog weddings. All that these researchers ever want is to go to heaven. What exactly is the purpose behind their research? Heaven? More funds for their research? Awards? Money? No matter what their interest, we shall focus on frog weddings to please Gods. Let’s pray that the newly married frog couple falls in love in their honeymoon and they quickly have a baby frog. The frog offspring must be male off course. Thereafter, we will send the baby boy frog to Kota for coaching classes to crack the IIT entrance exams. A corporate job after IIT for the baby boy frog and then we will put him up for sale in the marriage market. What next? An even more lavish frog wedding. All to please the Gods for adequate rainfall. God helps those who help themselves? Shut up.

Selling pakoras on the pavement – Whose dream job is it?

I love pakoras and also roadside tea. I have spent enough time of my life eating pakoras and having tea in and around Delhi to know who these people are, where they are from, and what their aspirations are. By conversing with these friendly ‘bhaiyyas’ who create magic with besan and oil which we can’t replicate at home no matter how hard we try, I have learnt that they really are ordinary people with hopes and aspirations. Our politicians who live a luxurious life at our expense have clue about these people. They come like monarchs of the yesteryear's before the elections in their fancy cars or even helicopters protected by security forces (again paid for by our taxes) and make long insincere promises. These obnoxious people know very little about what they are talking. The latest salvo by ‘he who must not be named’ with regard to roadside pakora stalls as gainful employment options for India’s youth may go down as one of the most cruel statements in history after the “Let them have cake” by the French queen.

Roadside pakora sellers in and around Delhi usually hail from rural Bihar or Uttar Pradesh. Driven out of the rural areas due to the crisis in agriculture, they are eking out a living in Delhi with hopes of educating their children so that their children can have a better life. If only our Prime Minister could listen to the ‘man ki baat’ of these men, he would find out how hard these people work for upward mobility. They are very concerned about their children’s education. Most of their children go to private schools and also private tutors. If you ask them what they want to become once they grow up, the answer always is ‘sarkari naukri’. Unlike Indian politicians, none of them want their children to follow their footsteps and become pakora sellers. Then who actually wants to take up the great job of a pakora seller that is being offered. Nobody. It is a distress options for those driven out of agriculture. Some please inform ‘he who must not be named’.